DRE Exam 6
A residential buyer needs to be notified about the proximity of a military establishment that contains explosives if the establishment is within ____ mile(s) of the property. a) 1 b) 2 c) 5 d) 8
1 The existence of military installation needs to be disclosed if it is located within 1 mile of the subject property.
A seller is required to deliver earthquake safety guides to buyers of most masonry buildings with wood frame floors or roofs built prior to: a) 2000 b) 1990 c) 1980 d) 1975
1975 *the question refers to a specific form of construction- masonry buildings with wood frame floors/roofs. Otherwise, the earthquake safety guide needs to be delivered to buyers of all homes built prior to 1960.
The economic life of a frame dwelling is most nearly: a) 100 years b) 50 1/2 years c) 39 years d) 27 1/2 years
27 1/2 years *27 1/2 years is the basis for depreciation under the IRS tax code and is thus the general economic life of a frame dwelling.
Under the Interstate Land Sale Act, a buyer of real estate has a ______ right of rescission. a) 3 business day b) 4 business day c) 1-week d) 2-week
3 business day The Interstate Land Sales Act gives the buyer a 3 business day right of rescission.
If a residential landlord under a month-to-month rental agreement desires to increase rent less than 10%, the landlord serves a: a) 30-day notice of change in rental terms b) 60-day notice of change in rental terms c) 90-day notice of change in rental terms d) 3-day notice to pay rent or quit
30-Day notice of change in rental terms. If a residential landlord under a rental agreement seeks to increase rent in an amount less than 10%, a 30-Day notice is required.
Property can be transferred without consideration with a gift deed. However, the transfer by a gift deed may be voided by: a) the grantee b) a creditor of the grantor c) a debtor of the grantor d) the trustee
A creditor of the grantor Creditors of a grantor may void a transfer by a gift deed. The grantor cannot gift the property to another in order to avoid debt held by a creditor.
Which of these documents provides the most protection to a property owner in default? a) a first trust deed b) a mortgage c) a land sales contract d) a fixed-term lease with an option to buy
A mortgage A mortgage requires a judicial foreclosure and thus offers the greatest protection as the owner is provided a longer period of time to cure the default.
The least protection from a defect in a property's title is provided by a: a) standard policy of title insurance b) American Land Title Association- ALTA title policy c) guarantee of title d) abstract of title
Abstract of Title An abstract of title is simply a report showing the chain of title issued by the title company after a search of title records. It does not provide protection from title defects.
The Energy Efficient Ratio (EER) rating concerns: a) air conditioning and heating units b) environmental conservation requirements c) electrical energy usage d) utility efficiency of an income-producing property
Air conditioning and heating units * the EER rating is listed on newer heating and air conditioning units. Superior ratings earn the product an energy star label.
Acquisition is the opposite of: a) ad valorem b) amortization c) alienation d) avulsion
Alienation *alienation is a transfer of property, such as a sale. Thus, it is the opposite of acquisition, which is a purchase of a property.
The owner of a residential property found guilty of discrimination in violation of the Rumford Act may be required to: a) sell or rent the property to the aggrieved person b) find a similar property to rent to the aggrieved person if one is available c) pay a civil penalty of $10,000 d) any of the above
Any of the above The CA Rumford Act May carry potential penalties for discrimination violations, including being forced to sell or lease the property to the aggrieved person, locating a similar property for them or civil penalties up to $10k.
In order to be enforceable, a land sales contract needs to be: a) be in writing b) include a mediation clause c) state the appropriate vesting for the vendee d) have a term no greater than 10 years
Be in Writing *under the Statute of Frauds, a real estate contract, such as a land sales contract or listing, needs to be written to be enforceable.
An unsuspecting buyer who acquires the ownership of real estate without actual knowledge or recorded notice of a pre-existing enforceable purchase agreement held by another buyer regarding the same property is referred to as a(n): a) Bona fide purchaser b) insolvent purchaser c) piggyback purchaser d) arms length purchaser
Bona fide purchaser *Bona fide purchaser is a buyer who lacks knowledge the property they are buying is the subject of a sale to another buyer, and purchases the property for valuable consideration.
The maker of a negotiable instrument is able to defend against a holder in due course in the event of: a) forgery b) incapacity c) both a and b d) neither a nor b
Both a and b *both forgery and incapacity are a suitable defense against a holder in due course.
The appraisal process which allocates a percentage of a property's total value to the land and a percentage to the improvements is known as: a) ratio of total value to site value b) allocation approach c) both d) neither
Both! *the appraisal process that allocates a percentage of a property's total value to land and a percentage to the improvements is known as the allocation method. It is the ratio of total value to the site value.
For a buyer's broker to have the ability to negotiate their fee, the buyer's broker needs to enter into an employment agreement with their buyer, called a: a) buyer's listing b) affiliated business arrangement c) cooperating broker arrangement d) controlled business arrangement
Buyers Listing * a buyers listing is the appropriate contract for the purpose of negotiating fees as the buyer's broker
A resident of Nebraska who owns property in California dies while in Vermont. The probate procedures for this property are handled in: a) Nebraska b) California c)California or Nebraska d) federal court
California *property is probated in the state where it is located regardless of the owner's residency or place of death.
Title VIII, also known as the Federal Fair Housing Act, refers to the: a) Civil Rights Act of 1968 b) Unruh Law c) Civil Rights Act of 1964 d) Rumsford Act
Civil Rights Act of 1968
In which appraisal approach to value would the value for the land be calculated separately? a) capitalization b) gross rent multiplier c) market comparison d) cost
Cost *in the cost approach, the cost of constructing the property improvements and the cost of the land are handled separately and then combined to arrive at a final value for the complete property.
Return of an investors investment is provided for through... a) sinking funds b) depreciation c) reserve for replacement d) profit
Depreciation *Depreciation, as an income tax deduction, is the means by which investors have their investment returned.
An elevation sheet which is used in a subdivision shows which of the following:
Drawings of the front and side views of the finished homes
An acquired right to use land that is less than an estate is known as a(n): a) leasehold b) remainder c) riparian right d) easement
Easement An easement is the specific right to use land, but is not an estate. Alternatively, a leasehold is an estate. A remainder in interest will become an estate when realized. Riparian rights do not include the use of land but the water flowing over or under land, and thus are not applicable to this question.
When land is subject to an easement, it is said to be: a) encroached upon b) encumbered c) an estate at sufferance d) restricted
Encumbered The word encumbrance May imply a debt. However, it may also be another type of burden, such as a lease or an easement.
A lessee rents an apartment from May 1st to July 1st of the same year. The lessee's tenancy is thus classified as a: a) periodic tenancy b) estate at sufferance c) estate at will d) estate for years
Estate for years *the estate for years need not be an extended period of time or even a full year. However, it must be for a specific period of time, as occurs under a lease.
If present at the formation of a contract, which of the following does not make a contract voidable? a) fraud b) duress c) undue influence d) illegal purpose
Illegal Purpose
A federally chartered bank charges an additional $200 fee on loans made to non-English speaking borrowers. This fee is: a) permitted if the fee is justified by the additional cost of translating contracts b) in violation of Holden Act c) not in violation of any Fair Housing laws d) prohibited under the Statute of Frauds
In violation of the Holden Act The California Holden Act makes it unlawful to discriminate in real estate financing by charging additional fees only to a certain group of people.
A property owner has been doing car repairs in their driveway- violation of CC&RS. The HOA filed a lawsuit and receives a court order requiring the owner to stop. The court order is called a: a) attachment lien b) lis pendens c) injunction d) mechanic's lien
Injunction *a court ordered injunction requires someone to cease and desist an inappropriate activity. *lis pendens is a recorded doc to deliver constructive notice of a pending lawsuit *the liens state a specific amount of money
The Agency Law Disclosure form is NOT mandated to be presented to all parties when listing, selling, buying or exchanging: a) 5 or more residential units b) land with an attached mobile home c) both a and b d) neither a nor b
Land with an attached mobile home *only properties covered by the Agency Law Dosclosure rules are residential properties of 5 or more units or mobile homes that are not on a foundation, considered personal property
Which of the following are classified as finance charges under the federal Truth-in-Lending Act: TILA? a) document preparation fees b) loan assumption fees c) title insurance costs d) appraisal fee
Loan Assumption Fees Loan assumption fees are classified as finance charges! All other options are expenses involved in originating a loan.
Seller Suzy provides carryback financing to Buyer Mel secured by a trust deed. Mel goes into default. Which of the following statements is true? a) Suzy can get a court order to force Mel to vacate the property b) Suzy can treat Mel as a tenant and define the deed as an invalid security device c) Suzy can sue Mel for possession d) Mel will have a period of time to redeem the property
Mel will have a period of time to redeem the property With seller carryback financing, the seller -as the mortgage holder- will normally pursue a non judicial trustee's sale to foreclose on the loan. A trustee's sale provides the borrower 90 days to redeem the property by paying the default before the sale procedure begins.
If a lease requires the tenant to pay certain expenses such as taxes, maintenance or insurance in addition to the rent, the lease is classified as: a) gross lease b) net lease c) percentage lease d) estate for will
Net Lease *a net lease causes the tenant to pay certain expenses, taxes, maintenance and insurance, in addition to rent. A gross lease requires the landlord to pay all these expenses.
The adjusted basis of a personal residence is the property's: a) original cost b) original cost minus improvements plus interest expenses c) original cost plus improvements minus depreciation d) original cost plus improvements
Original cost plus improvements *the adjusted cost basis of personal residence is a number developed for income tax purposes. It requires adding the cost of any improvements made to the property to the original cost paid. Note there is no depreciation allowance for a personal residence.
Which of the following does NOT contribute to obsolescence? a) outdated appliances b) changes in flight pattern from local airport c) misplaced improvements d) physical deterioration
Physical Deterioration * physical deterioration- wear & tear- is not obsolescence! Obsolescence is most often seen as items that are out of style or out of date. In a neighborhood it is something that reduces value.
The sale of real estate under a conditional installment sale gives the buyer (vendee): a) possession of the property b) a freehold estate c) an estate of inheritance d) an estate for years
Possession of the property *the vendee's rights under an installment sale- possession of the property- are called an equitable interest.
If a buyer and seller decide to recons a deal after the deed has been recorded the buyer is to: a) récord a deed of reconveyance b) return the deed to the seller for consideration c) récord a cancellation of transaction d) provide a new grant deed to the seller
Provide a new grant deed to the seller *once the deed is recorded, a new deed is needed to transfer the property to anyone else
When the Fed intends to tighten the amount of money in circulation, it sells government bonds on the open market and: a) lowers the discount rate b) raises the amount of reserves required for member banks c) purchase a greater volume of foreign currency d) deregulates the mortgage lending industry
Raises the amount of reserves required for member banks The Fed can require larger reserves for member banks and sell government bonds to reduce the amount of cash in circulation. This is known as tight monetary policy.
A gross lease is least likely to be found in: a) condo rentals b) vacation properties c) motels d) retail spaces
Retail Spaces *a gross lease refers to the form of rental payment. Under a gross lease, the landlord retains the responsibility for payment of all costs of care and maintenance. Only the retail property may be the exception because it is a business and typically subject to a net lease, which requires the tenant to pay all maintenance and operating costs.
Real estate brokers are required to have written employment contracts with: a) all clerical staff they employ b) non-licensees they employ c) salespersons they employ d) all of the above
Salespersons they employ *written contracts are required to properly document a broker's employment of a salesperson. The contract will state the duties of the broker and the agent. Split of commissions. Insurance requirements. Risk management.
Which of the following types of rental income would be the highest? a) scheduled gross income b) gross operating income c) net operating income: NOI d) net spendable income
Scheduled Gross Income Pre-tax gross income will always be greater than post-tax net income- just like a paycheck. Scheduled gross income is the amount that is charged to the tenants. Gross operating income is a lesser amount as it is the scheduled gross income minus vacant rentals and delinquent payments.
While appraising a single family residence (SFR), an appraiser observes cracks in the walls and floor. In response, the appraiser best recommends which of the following? a) structural pest control report b) soil engineers report c) environmental impact report EIR d) home warranty policy
Soil Engineers Report *cracks in walls or floors most likely to be a soil stability concern rather than a pest issue.
A seller carryback note is classified as a ______ lien. a) specific b) general c) involuntary d) equitable
Specific *As a specific lien, a seller carryback note will stipulate the specific property that is securing the loan. If this is an income tax lien, it will be attached to everything the person owns and be classified as a general lien.
What is meant by "unadjusted basis"? a) the original cost of a property minus losses and depreciation b) the original cost of a property plus improvements minus depreciation c) the equity built up in a property due to amortization d) the original cost of a property
The original cost of a property. The unadjusted basis is the original cost of the property. One is generally asked to identify the adjusted basis, which is the original cost of a property plus improvements minus depreciation. This value is required for capital gains tax purposes.
The fiduciary relationship between an agent and the principal is most similar to the fiduciary relationship between a(n): a) borrower and seller b) vendor and vendee c) trustee and beneficiary d) property owner and tenant
Trustee and Beneficiary Fiduciary is a matter of utmost trust and loyalty. This is most closely associated with the relationship between a trustee and the beneficiary.
A property's effective gross income is found by deducting which of the following from scheduled gross income? a) property management fees b) vacancies and credit losses c) debt service d) depreciation
Vacancies and credit losses Scheduled gross income - vacancies and credit losses = effective gross income. NOI = effective gross income- operating expenses
On the transfer of real property, a previous grant of an unlocated easement is a) valid b) void upon transfer c) voidable by the servient tenement if not used for 5 years d) voidable by the servient tenement since a deed cannot be the instrument used to create an easement
Valid An easement created by deed cannot be voided by nonuse. None of the alternative answer selections are reasonable- a servient tenement has no authority to void an easement.
In a land sales contract, the seller who is also acting as the lender is usually referred to as the: a) trustee b) beneficiary c) vendee d) vendor
Vendor The seller of real estate is the -or person. The principals in a land sales contract are referred to as vendor and vendee because the transfer involved a contract of sale- think of a vendor in a ballpark or a vending machine.
Which of the following will have the least degree of influence on real estate in the future? a) the community's general plan b) regulation of the real estate industry c) demographics d) weather
Weather *weather has the least amount of direct influence on the future of the real estate market
When is the usefulness of the appraisal cost approach the least appropriate? a) when appraising homes in a new subdivision b) when appraising an old structure with many functional deficiencies c) when appraising raw land intended for future construction d) when appraising a mixed use property
When appraising an old structure with many functional deficiencies. The cost approach to appraisal is of least utility when appraising an old structure with numerous functional deficiencies
If there is no specific closing date named in the escrow instructions, escrow is to close:
Within a reasonable period of time.
The stability of a residential neighborhood is maintained by all of these, EXCEPT: a) a high home sale turnover rate and increasing population density. b) being located in the pathway of growth c) having many family household with school age children d) the conformity of residents with similar occupations
a high home sale turnover rate and increasing population density. Stability and high turnover may be seen as the converse of one another. The alternative answers either support stability or at least do not directly work against it.
For delivery of a deed to occur, a grantor must intend to convey title and the grantee needs to: a) récord the deed with the county b) accept the deed as immediately effective c) check public records d) notarize and sign the deed
accept the deed as immediately effective. For a delivery of a deed to occur, the grantee needs to accept the deed as immediately effective, not effective at a later date.
Based on the principle of leverage, an investor will: a) use their own funds whenever possible b) use borrowed money only to the degree deemed safe and reasonable c) buy income property with a minimum down payment d) invest in rental properties with declining values
buy income property with a minimum down payment. Leverage, in financial terms, requires using as little equity investment as possible.
For appraisal purposes, "capitalization" is a process used to: a) concert future benefits to present net worth b) determine both physical and functional depreciation c) establish an appropriate rate of return for the investor d) properly market a property for sale in the MLS
convert future benefits to present net worth. Capitalization is the process to convert future income into a present value. To do this, a cap rate needs to be determined. The cap rate is calculated by dividing the net operating income by the price asked or offered for income property.
Under California law, a trust deed: a) transfers equitable title to the vendee b) names only 2 parties to the agreement c) automatically records the release of the property when the loan has been paid off d) creates an encumbrance on the property described in the deed of trust
creates an encumbrance on the property described in the deed of trust Trust deeds represent the security for a note and do not transfer equitable title. There are 3 parties to a trust deed: trustor-borrower, beneficiary-lender, and trustee- holder of naked title. There is no automatic recording of release of title
The gross rent multiplier (GRM) is determined by: a) dividing the sales price by net spendable income b) dividing the sales price by the gross scheduled rent
dividing the sales price by the gross scheduled rent!
Brokerage events triggering a listing agent's preparation of a seller's net sheet includes: a) entering into a seller's listing agreement. b) submitting a buyer's purchase agreement to a seller. c) both d) neither
entering into a seller's listing agreement. submitting a buyer's purchase agreement to a seller.so both! Prepared by sellers agent to disclose the financial consequences of a sale when setting the listing price and on acceptance of a buyers price to purchase offer.
Which of the following is the best example of functional obsolescence? a) the close proximity of noxious fumes generated by a neighboring property b) adverse zoning within the adjoining neighborhood c) no air conditioning in a building located in an arid, desert environment d) rotted eaves
no air conditioning in a building located in an arid, desert environment Functional obsolescence is a loss of value due to adverse factors within the structure which affect the utility of the structure, and thus its marketability. A and B are examples of Economic Obsolescence.
A lease is classified as a(n): a) freehold estate b) estate at sufferance c) personal property interest d) remainder in interest
personal property interest A freehold estate constitutes ownership. A remainder in interest is the future interest that will become a freehold estate once title has been transferred. A lease is a personal property interest.
When a lease is for a period greater than one year, the contract does not require: a) signatures of both the owner and tenant b) that the lease agreement be in writing c) a specific termination date d) a description of the rental and its location
signatures of both the owner and tenant. A lease does not require the signature of the owner, only the tenant. Regardless of the length of time, a lease always must have a termination date- unlike a rental agreement. Further a lease needs to be in writing to be enforceable if for a term greater than 1 year.
Frank leased a property to Chester. Chester gave Mark an easement over the property. At the end of the lease term:
the easement may not extend beyond the term of Chester's lease. If an easement is given by lease, it ends when the lease is terminated
A transfer by deed is void when: a) the grantors name is fictitious b) the grantee is nonexistent c) the grantees name is fictitious d) the deed is obtained through false representations
the grantee is nonexistent. A nonexistent grantee is likely an unlawful attempt by the grantor to hide an asset. Thus, a deed which transfers ownership to a nonexistent grantee is void as purpose is unlawful. *Fictitious names have legal purpose. *deed is voidable when obtained through glass representation, not void at its inception
All of the following statements are true concerning an in-house sale, except: a) the listing broker can buy the property themselves b) the listing broker can act as an agent for the seller c) the listing broker can act as an agent for the buyer only d) the listing broker can act as a dual agent
the listing broker can act as an agent for the buyer only *an in-house sale is one where the listing broker is sold by an agent within the same firm. Since the listing broker represents the seller, the only condition that cannot occur is for the broker to represent only the buyer
What does "discounting" refer to in the context of real estate finance? a) the process of calculating the annual percentage rate: APR of a given loan b) liquidating real property that secured a debt in default c) the loan proceeds disbursed to the lender when reselling a note and trust deed d) subordinating a debt
the loan proceeds disbursed to the lender when reselling a note and trust deed A mortgage can be resold to an investor after it is originated. In order to convert a future income stream into cash, the lender needs to "discount" it's value. In other words, a dollar in the future may be worth 80 cents cash today.
